Income Tax Appellate Tribunal - Kolkata
Shree Venkatesh Agro Food Pvt. Ltd., ... vs Assessee on 17 October, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH "A" KOLKATA Before Shri Mahavir Singh, Judicial Member and Shri Shamim Yahya, Accountant Member IT(SS)A No.54-56/Kol/2011 Assessment Years: 2006-07 to 2008-09 M/s Shree Venkatesh बनाम Dy. Commissioner of Agro Food Pvt. Ltd., 174, Income Tax, Central / C.R. Avenue, Kolkata - Circle-V Kolkata V/s.
700 007
[PAN No.AAICS 6811 N]
अपीलाथȸ /Appellant .. ू×यथȸ /Respondent
IT(SS)A No.66-69/Kol/2011
Assessment Years: 2002-03 to 2005-06
DCIT, Central Circle-V, 5th बनाम Shree Venkattesh Agro Floor, Poddar Court, 18, Foods Pvt. Ltd., 174, C.R. / Rabindra Sarani, Kolkata - Avenue, Kolkaa - 700 007 V/s.
700 001
अपीलाथȸ /Appellant .. ू×यथȸ /Respondent
आवेदक कȧ ओर से/By Assessee Shri S.K.Tulsiyan, Advocate
राजःव कȧ ओर से/By Revenue Dr. Swetabh Suman, CIT-DR
सुनवाई कȧ तारȣख/Date of Hearing 27-08-2014
घोषणा कȧ तारȣख/Date of Pronouncement 17-10-2014
आदे श /O R D E R
PER BENCH:-
Out of these seven appeals - three by assessee and four by Revenue are arising out of the order of Commissioner of Income Tax (Appeals), Central-I, Kolkata in appeals No.369-375/CIT(A),C-I/CC-V/09-10 by different dates 17-01-2011 and 18- 01-2011. Assessment(s) were framed by DCIT, CC-V, Kolkata u/s. 143(3), 153B(b), IT(SS)A No.54-56 & 66-69/Kol/2011 A.Ys.06-07 to 08-09 and 02-03 to 05-06 Shree Venkatesh Agro Food Pvt. Ltd. v. DCIT, CC-V, Kol Page 2 153A, 153D of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') vide his orders dates 31-12-2009 for assessment years 2002-03 to 2008-09 respectively.
First we take up assessee's appeals in IT(SS)A No.54-56/Kol/2011.
2. The first issue in IT(SS)A No.54/Kol/2011 of the assessee is against the order of CIT(A) confirming ad hoc disallowance @ 5% made by the Assessing Officer on account of various general expenses. For this, assessee has raised following ground No.2:-
"2. On the facts and in the circumstances of the case, the learned CIT(A) erred in upholding the disallowance of Rs.8,63,229/- made at the ad-hoc rate of 5% of the total expenses claimed under different heads neglecting to take into consideration the fact that the accounts of the appellant company are fully audited."
3. Briefly stated facts are that a search u/s 132 of the Act was conducted on the business and residential premises of the assessee and its Director on 04-10-2007. During the course of assessment proceedings, the AO made disallowance of expenses @5% of the following expenses:-
Expenditure Amount of disallowance
1) Generator expenses 1,36,89,672/- 6,83,483/-
2) Loading Unloading charges 15,54,514/- 77,725/-
3) Repair & Maintenance 8,19,090/- 40,954/-
4) Laboratory expenses 1,44,613/- 7,230/-
5) Packing expenses 10,18,878/- 50,943/-
6) Travelling & conveyance 57,877/- 2,894/-
8,63,229/-
The AO noted that the assessee failed to file details and hence, he estimated the disallowance @ 5% of the above disallowance. Aggrieved, assessee preferred appeal before CIT(A), who confirmed on same reasoning.
4. We have heard rival contentions and gone through the facts and circumstances of the case. We find that AO has made disallowance on ad hoc basis @ 5% and there is no basis for making disallowance. We also observe that CIT(A) has simply IT(SS)A No.54-56 & 66-69/Kol/2011 A.Ys.06-07 to 08-09 and 02-03 to 05-06 Shree Venkatesh Agro Food Pvt. Ltd. v. DCIT, CC-V, Kol Page 3 confirmed the disallowance. Whether the disallowance by restricting @ 5% on account of business expenditure can be made or not in the absence of any reasoning? The disallowance purely by resorting to ad hoc method cannot be made. These are business expenditure, and in the absence of cogent reason, the disallowance should not have been made. We hold that disallowance made by AO is without any basis and hence deserves to be deleted. Accordingly, we delete the disallowance. This issue of assessee's appeal is allowed.
5. The next common issue in these three appeals of assessee in IT(SS)A No. 54- 56/Kol/2011 is as regards to the order of CIT(A) confirming the disallowance of employees' contribution to ESI & P.F. For this, assessee has raised identical worded grounds except the amount. The relevant ground as raised in IT(SS)A No.54/Kol/2011 for AY 2006-07 reads as under:-
"3. On the facts and circumstances of the case, the learned CIT(A) erred in upholding the disallowance of Rs.9,330/- in respect of the Employees' contributions to E.S.I. & P.F."
6. We have heard rival contentions and gone though the facts and circumstances of the case. We find that in all the three AYs, the dates are noted by the AO and the payments are made within the due date of filing of return of income u/s.139(1) of the Act as is evident from the assessment order. Now, this issue stands covered in favour of assessee and against the Revenue by the decision of Hon'ble jurisdictional High Court in the case of CIT v. M/s Vijay Shree Limited vide ITAT No.245 of 2011 in GA No.2607 of 2011 dated 7th September, 2011, wherein it has been held as under:-
"After hearing Mr. Sinha, learned advocate, appearing on behalf of the appellant and after going through the decision of the Supreme Court in the case of Commissioner of Income Tax vs. Alom Extrusion Ltd., we find that the Supreme Court in the aforesaid case has held that the amendment to the second proviso to the Sec. 43(B) of the income Tax Act, as introduced by Finance Act, 2003, was curative in nature and is required to be applied retrospectively with effect from 1st April, 1988.
Such being the position, the deletion of the amount paid by the Employees' contribution beyond due date was deductible by invoking the aforesaid amended provisions of Section 43(B) of the Act.
We, therefore, find that no substantial question of law is involved in this appeal and consequently, we dismiss this appeal."
IT(SS)A No.54-56 & 66-69/Kol/2011 A.Ys.06-07 to 08-09 and 02-03 to 05-06 Shree Venkatesh Agro Food Pvt. Ltd. v. DCIT, CC-V, Kol Page 4 Once this position, the issue is squarely covered in favour of assessee by the jurisdictional High Court in the case of M/s Vijay Shree Limited (supra). As the issue is covered, we allow this common issue in these three appeals of assessee.
Coming to Revenue's appeals in IT(SS)A No.66-69/Kol/2011 (AYs 02-03 to 05-06)
7. The first common issue in IT(SS)A No. 66 and 67/Kol/2011 is against the order of CIT(A) deleting the addition made by Assessing Officer on account of deemed dividend. For this, Revenue has raised following ground nos. 3 and 4 in IT(SS)A 66/Kol/2011 and ground No. 3 in IT(SS)A No.67/Kol/2011:-
IT(SS)A No.66/Kol/2011 "3) That the Ld. CIT(A), Central-I, Kolkata is erred in deleting the addition on account of deemed dividend of Rs.8,44,353/- relying on the case law of M/s. LMJ International 119 TTJ(Kol) 214."
4) That the Ld. CIT(A), Central-I, Kolkata is erred in deleting the addition on account of deemed dividend of Rs.16,48,980/- relying on the case law of M/s LMJ International 119 TTJ (Kol) 214."
IT(SS)A No.67/Kol/2011 "3) That the Ld. CIT(A), Central-I, Kolkata is erred in deleting the addition on account of deemed dividend of Rs.6,02,944/- relying on the case law of M/s. LMJ International 119 TTJ (Kol) 214."
8. Briefly stated facts are that there was a search and seizure operation carried out on the business and residential premises of the assessee on 04-10-2007 along with the Memani Group of cases. Accordingly, notice u/s 153A of the Act was issued and in response to the same, assessee filed return of income. The AO while framing the assessment made addition of deem dividend of Rs.16,48,950/- and Rs.8,44,353/- in AY 2002-03 and Rs.6,02,944/- in AY 2003-04. The contention of the assessee was that this has already been considered in the original assessment framed u/s 143(3) of the Act and no new facts came to the knowledge of the revenue or any incriminating material was found during the course of search which suggests that assessee has not disclosed the income. The CIT(A) deleted the addition by holding that since there is no incriminating materials were found during the course of search, the addition IT(SS)A No.54-56 & 66-69/Kol/2011 A.Ys.06-07 to 08-09 and 02-03 to 05-06 Shree Venkatesh Agro Food Pvt. Ltd. v. DCIT, CC-V, Kol Page 5 cannot be subject-matter under the proceedings initiated u/s. 153A of the Act. The CIT(A) in para-3.2 has observed as under:-
"3.2 I have carefully considered the submission of the A.R. In the assessee's case, as on the date of search, assessment for the year under consideration had already been completed. At the time of original assessment, the income declared had been accepted by the AO. In course of the search action in the group case, nothing incriminating in respect of such addition / disallowance were found. Since the above claims had been accepted in course of normal assessments, and since there is no change in the facts and circumstances compared to the past, the AO was not justified in reviewing the completed assessment of the said year merely because a search action has been carried out in the premises of company. S. 153A does not authorize the making of a de novo assessment. While under the 1st proviso, the AO is empowered to frame assessment for six years, under the 2nd proviso, only the assessments which are pending on the date of initiation of search abate. The effect is that completed assessments do not abate. Since,, addition on account of deemed dividend doesn't emanate from incriminating material found during the course of search, hence the same cannot be the subject matter of consideration under the proceeding under section 153A. Hence I must follow the decision of LMJ International vs DCIT (2008) 119 TTJ (Kol) 214 to maintain the judicial discipline, where it has been held that where nothing incriminating is found in the course of search proceeding relating to any assessment years, the completed assessment for such years cannot be disturbed Accordingly the disallowance of Rs.4575/- and addition of Rs.24,93,333/- (Rs.16,48,950/- + Rs.8,44,353) on account of deemed dividend made by the A.O is deleted. Accordingly the ground no 2 to 5 taken by the appellant is allowed."
We find that this issue is now squarely covered in favour of assessee and against Revenue by the decision of Hon'ble Rajasthan High Court in the case of Jai Steel (India) Vs. ACIT reported in (2013) 88 DTR (Raj) 1, wherein it is held as under:-
"The provisions of Sections 153A to 153C cannot be interpreted to be a further innings for the AO and/or assessee beyond provisions of Sections 139 (return of income), 139(5) (revised return of income), 147 (income escaping assessment) and 263 (revision of orders) of the Act.
The plea raised on behalf of the assessee that as the first proviso provides for assessment or reassessment of the total income in respect of each assessment year falling within the six assessment years, is merely reading the said provision in isolation and not in the context of the entire section. The words 'assess' or 'reassess' have been used at more than one place in the Section and a harmonious construction of the entire provision would lead to an irresistible conclusion that the word 'assess' has been used in the context of an abated proceedings and reassess has been used for completed assessment proceedings, which would not abate as they are not pending on the date of initiation of the search or making of requisition and which would also necessarily support the interpretation that for the completed assessments, the same can be tinkered only IT(SS)A No.54-56 & 66-69/Kol/2011 A.Ys.06-07 to 08-09 and 02-03 to 05-06 Shree Venkatesh Agro Food Pvt. Ltd. v. DCIT, CC-V, Kol Page 6 based on the incriminating material found during the course of search or requisition of documents.
The Allahabad High Court in Commissioner of Income-tax (Central, Kanpur v. Smt. Shaila Agarwal (supra) has held as under:-
"19. The second proviso to Section 153A of the Act, refers to abatement of the pending assessment or reassessment proceedings. The word 'pending' does not operate any such interpretation, that wherever the appeal against such assessment or reassessment is pending, the same alongwith assessment or reassessment proceedings is liable to be abated. The principles of interpretation of taxing statutes do not permit the Court to interpret the Second Proviso to Section 153A in a manner that where the assessment or reassessment proceedings are complete, and the matter is pending in appeal in the Tribunal, the entire proceedings will abate.
20. There is another aspect to the matter, namely that the abatement of any proceedings has serious causes and effect in as much as the abatement of the proceedings, takes away all the consequences that arise thereafter. In the present case after deducting bogus gifts in the regular assessment proceedings, the proceedings for penalty were drawn under Section 271 (1)(c) of the Act. The material found in the search may be a ground for notice and assessment under Section 153A of the Act but that would not efface or terminate all the consequence, which has arisen out of the regular assessment or reassessment resulting into the demand or proceedings of penalty."
(emphasis supplied) The said judgment which essentially deals with second proviso to Section 153A of the Act also supports the conclusion, which we have reached hereinbefore.
It has been observed by the Hon'ble Supreme Court in K.P. Varghese v. Income Tax Officer : (1981) 131 ITR 597 that "it is well recognized rule of construction that a statutory provision must be so construed, if possible that absurdity and mischief may be avoided."
The argument of the counsel for the appellant if taken to its logical end would mean that even in cases where the appeal arising out of the completed assessment has been decided by the CIT(A), ITAT and the High Court, on a notice issued under Section 153A of the Act, the AO would have power to undo what has been concluded upto the High Court. Any interpretation which leads to such conclusion has to be repelled and/or avoided as held by the Hon'ble Supreme Court in the case of K.P. Varghese (supra).
Consequently, it is held that it is not open for the assessee to seek deduction or claim expenditure which has not been claimed in the original assessment, which assessment already stands completed, only because a assessment under Section 153A of the Act in pursuance of search or requisition is required to be made.
In view of the above discussion, the answer to the substantial question of law
(iv) above is in the positive and against the appellant assessee, the other three IT(SS)A No.54-56 & 66-69/Kol/2011 A.Ys.06-07 to 08-09 and 02-03 to 05-06 Shree Venkatesh Agro Food Pvt. Ltd. v. DCIT, CC-V, Kol Page 7 questions consequently do not arise, and, as such, the appeal fails and is, therefore, dismissed. No costs.
Registry is directed to place a copy of this judgment on record in each connected file."
Admittedly, there is no seized incriminating materials found during the course of search in this case, and without any evidence the AO has made addition of deemed dividend. The issue is squarely covered in favour of assessee and against the Revenue by the decision of Special Bench in the case of All Cargo Global Logistics Ltd., v. DCIT(2012) 181 ITR (Trib) 106 (Mum) (SB) as well as by the decision of Hon'ble Rajasthan High Court in the case of Jai Steel (India) supra. As the issue is covered in favour of assessee, we confirm the order of CIT(A) deleting the addition. This common issue of Revenue's appeals is dismissed.
9. The next common issue of Revenue's appeals in IT(SS)A No.66-67/Kol/2011 is as regards to deleting the disallowance of loss incurred on account of expenses of Rs.4,575/- for A.Y. 2002-03 and Rs.6,950/- for A.Y 2003-04. These common issues are exactly covered by the facts as discussed in earlier ground above. As the issue is exactly identical and no incriminating materials were found during the course of search as noted by CIT(A), we confirm the order of CIT(A) in deleting the addition. This common issue of Revenue's appeals is dismissed.
10. The next common issue in IT(SS)A No. 68 and 69/Kol/2011 is against the order of CIT(A) deleting the disallowance of expenses made by Assessing Officer. For this, Revenue has raised in IT(SS)A 68/Kol/2011 ground No. 3 & 4 and IT(SS)A No.69/Kol/2011 grounds No. 3, 4 & 5:-
IT(SS)A No.68/Kol/2011 (A.Y.04-05) "3) That the Ld. CIT(A), Central-I, Kolkata is erred in deleting the disallowance of expenses of Rs.2,11,220/- relying on the case law of M/s. LMJ International 11( TTJ (Kol) 214.
4) That the Ld. CIT(A), Central-I, Kolkata is erred in deleting disallowance of fees paid to R.O. C of Rs.66,200/- relying on the case law of M/s. LMJ International 119 TTJ (Kol) 214."
IT(SS)A No.54-56 & 66-69/Kol/2011 A.Ys.06-07 to 08-09 and 02-03 to 05-06 Shree Venkatesh Agro Food Pvt. Ltd. v. DCIT, CC-V, Kol Page 8 IT(SS)A No69/Kol/2011 (A.Y.05-06) "3) That the Ld. CIT(A), Central-I, Kolkata is erred in deleting the disallowance of expenses of Rs.7,29,769/- relying on the case law of M/s. LMJ International 119 TTJ (Kol) 214.
4) That the Ld. CIT(A), Central-I, Kolkata is erred in deleting the disallowance of fees paid to R.O.C of Rs.66,200/- relying on the case law of m/s LMJ International 119 TTJ (Kol) 214."
11. We have heard rival submissions and gone through facts and circumstances of the case. Briefly stated facts are that there was a search and seizure operation carried out on the business and residential premises of the assessee on 04-10-2007 along with the Memani Group of cases. Accordingly, notice u/s 153A of the Act was issued and in response to the same, assessee filed return of income. The AO while framing the assessment made additions of above noted expenses. The contention of the assessee was that this has already been considered in the original assessment framed u/s 143(3) of the Act and no new facts came to the knowledge of the revenue or any incriminating material was found during the course of search which suggests that assessee has not disclosed the income. The CIT(A) deleted the addition by holding that since there is no incriminating materials were found during the course of search, the addition cannot be subject-matter under the proceedings initiated u/s. 153A of the Act. Aggrieved, now revenue came in appeals before Tribunal on the above issues.
12. Admittedly, there is no seized incriminating materials found during the course of search in this case, and without any evidence the AO has made additions of the above expenses. The issue is squarely covered in favour of assessee and against the Revenue by the decision of Special Bench in the case of All Cargo Global Logistics Ltd., v. DCIT(2012) 181 ITR (Trib) 106 (Mum) (SB) as well as by the decision of Hon'ble Rajasthan High Court in the case of Jai Steel (India) supra. As the issue is covered in favour of assessee, we confirm the order of CIT(A) deleting the addition. This common issue of Revenue's appeals is dismissed.
13. The next issue in IT(SS)A No. 69/Kol/2011 of revenue's appeal is as regards to the order of CIT(A) confirming the disallowance of employees' contribution to IT(SS)A No.54-56 & 66-69/Kol/2011 A.Ys.06-07 to 08-09 and 02-03 to 05-06 Shree Venkatesh Agro Food Pvt. Ltd. v. DCIT, CC-V, Kol Page 9 ESI & P.F. The relevant ground as raised in IT(SS)A No.69/Kol/2011 for AY 2005- 06 reads as under:-
"5) That the Ld. CIT(A), Central-I, Kolkata is erred in deleting the disallowance of late payment of employees contribution to P.F. Rs.2,438/- relying on the case law of M/s. LMJ International 119 TTJ (Kol) 214."
14. As we have already deliberated this issue in favour of the assessee and which is covered by jurisdictional High Court decision in the case of M/s Vijay Shree Limited , supra, we confirm the order of CIT(A). This issue of revenue's appeal is dismissed.
15. In the result, all appeals of assessee are allowed and that of Revenue are dismissed.
Order pronounced in open court on 17/10/2014
Sd/- Sd/-
(Shamim Yahya) (Mahavir Singh)
Accountant Member Judicial Member
Kolkata,
*Dkp
Ǒदनांकः- 17/10/2014 कोलकाता
आदे श कȧ ूितिलǒप अमेǒषत / Copy of Order Forwarded to:-
1. आवेदक / Assessee - M/s Shree Venkatesh Agro Food Pvt. Ltd. 174, CR Avenue Kolkata-700 07
2. राजःव / Revenue - DCIT, C.C.V, Kolkata
3. संबंिधत आयकर आयुƠ / Concerned CIT
4. आयकर आयुƠ- अपील / CIT (A)
5. ǒवभागीय ूितिनिध, आयकर अपीलीय अिधकरण कोलकाता / DR, ITAT, Kolkata
6. गाड[ फाइल / Guard file.
By order/आदे श से, उप/सहायक पंजीकार आयकर अपीलीय अिधकरण, कोलकाता